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tv   On the Move  Bloomberg  January 20, 2015 3:00am-4:01am EST

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entral bank said shockwaves group markets denmark says it will not abandon its cap on the euro. and the anticipation of draghi's long-awaited quantitative easing. manus cranny is at the touchscreen. >> it is very much a case of yang and yang. yet the china data which beats one of the slowest years. we should take a little bit of heart from the retail cells numbers. is the imf cutting growth at the fastest rate in three years, really that much of a shot -- shock? we suck equity markets and commodity markets come under
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such an audible trouncing. global growth down at three and a half percent. they're cutting the inflation target globally. why have inflation target? -- targets? oil prices are falling again as long with a couple of individual names that caught our attention. great interviews done by caroline. there is a ceo who knows how to answer questions you they missed on their sales targets, there's slowest growth targets in 2014. s.a.p., when it comes to business, will mcdermott lowers
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the profit target and the sales target is lowered. and that is moving from licensed software. that is actually underplayed. salesforce is not something they are interested in buying. love the line yourself and mark along with lloyd's register. the models of 2008 and what that might mean for the price of crude. now if you want to see a currency that voices the ozzy dollar--- aussie dollar -dollar. that is incredibly important because that would be 15% below where we are and the bloomberg
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consensus stands at $.79. there is a big differential. >> i love when you play with fancy technology. the smoke this this morning is very much on china. 7.4% growth. let's bring in built lane, a friend of the show. thank you for coming in. >> 7.4%, pretty much as the government had intended. >> exactly. >> one of those things it comes up often when we talk about china. does that mean more stimulus or the same amount of stimulus? >> you have to be observant about what is going on in china. the big theme is how do they
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maintain growth at a sufficient level to keep the economy happy. that is the keyword. to keep the economy happy so we don't get pressure and defensive and all things like that there is -- things like that. we are likely to get a default in the residential construction sector. i don't know if everyone has been watching this copper trading scandal but it is interesting and going on all over the scandal -- country where banks have been lending on the basis of commodity collateral and those prices are crashing and causing all kinds of pain for the chinese banks but also some of the foreign banks. that is another thing to be watching and i think we need to keep a close focus on just where the chinese come and go.
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certainly there is a prospect of further stimulus. just keep an eye on it. we have on the screen, read for down and green for up. i'm afraid that markets today are yellow. we are waiting. we are watching. we had the big shock last week, ari going to see something this week? >> -- are we going to see something this week? >> in terms of the property market, you're expecting some pressure as a result. property related weakness was clear to see, they said, in that gdp numbers. and property starts -- they have declined and they say that is an augre of doom for the future. >> every time we send somebody
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out or one of our clients goes out to put boots on the ground, it is full of on resolved property. -- unsold property. there is property oversupply but there are still pockets of demand. on the question of property defaults, last year when we were expecting defaults in the corporate sector, the cracks were papered over with sudden bank lending that we think was driven run the government. maybe the same thing will happen this time and it is something you need to keep your eye on. when we did a survey at the end of last year remember this event that is totally unexpected but with hindsight, blindingly obvious. >> i can think of one.
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>> just like last week. everyone is saying we should have seen that one coming. for our clients last year, where they saw the biggest threats china was at the top of the list. >> let me ask you about the currency markets, you said it was completely unexpected and blindingly obvious. >> exactly. >> so is at the pressure other currency will come under? >> i have read the articles on bloomberg and you guys were talking about die mark. stop wasting your time, it is not going to happen. that piece of technology that he was playing with their, -- there that is a very interesting way to look at it. i think the real issue in
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currency has got to be the euro and that is going to be very interesting in the next couple of days. >> so what do you see? >> i would argue that the ecb has already achieved its goals with the euro. the euro has been brought down essentially and that makes it far more competitive. it is now sitting in a zone where economies that have done the right thing like spain, now look productive and competitive and companies like germany which rely on a high euro our threshold where they might start to squeeze and squeal. if we get a major shift, i think that could create more dissent and this is one of the reasons why i think this week's ecb meeting, the prospect of some
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halfhearted compromise qe will be very critical for markets and could end up in a trading snafu. >> you are not setting the bar high. >> i have limited expectations. >> bill, stay with us. after the break cuts all around. as the ecb prepares quantitative easing to jumpstart the european economy and the ims -- imf projecting growth this year, is it too little, too late? the german technology giant trading down after it lowered its profit target. it says business will be delayed. back in a few minutes. ♪
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>> qe has already happened. the markets have been anticipating it and the euro has depreciated. in a way the effects of qa -- qe are largely already in. >> that was a message rum --
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from olivier blanchard. he was saying that a lot of the effects of quantitative easing are already priced into the markets. a position you might sympathize with. >> yes, i would agree. everyone has been expecting it for so long, they have already traded into it. the first question is what are we likely to get and then what will that do to market. i think we will be disappointed. we are always disappointed with that ecb because it is an enormous gap shop of 22 members and they all have recurring votes and it is difficult to agree. there is a reason there is no statue of any successful committee because committees don't do anything. i think what we will see is some
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kind of compromise. that means a 500 billion program. rather than the one trillion the market was hoping for. at the end of the day, what does it matter how big the program is. by encouraging production and growth and heart of that is by getting the currency down. the rest of it is creating some kind of structure to encourage growth and that cannot happen under the current european rules because states are so constrained. they cannot prime their economies with infrastructure building and some economies have done absolutely nothing. so we have that situation and what is going to happen? i think it will be a euro short and a euro late? >> here is another thought, they
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could give us no number and specify an and goal instead, would that be more bold? >> my guess, and that is all it is, but reading between the lines, my guess is what we are going to see is some nebulous figure floated -- quoted or some buying figure quoted with final details to follow in march because that plays into another big theme which is kicking the can farther down the road. i do think we will not get the title form but what we will get is this is what the program is going to look at and we will tell you in march how it will work. >> any details on risk sharing about how much the various central banks will have their risk lesson and how much the central bank -- lessened and how much the central banks will share the risk.
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>> this is part of the compromised discussion going on with the germans and the dutch to try to find some way it does not become a european risk and the risk is not neutralized so they don't go to the courts and declare foul straight away. i am not particularly bothered about the way that happens. what i am more concerned about is how our markets going to react to whatever we hear. let's assume it is positive and we get something where we are stepping into the market tomorrow with one trillion we will spend on buying up european bonds and corporate bonds as well because that should be positive for all european bonds -- i suspect not. i think it will be a buy rumor which is what everyone has been doing for months. >> a couple years even.
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>> yes, they had a great trick you pulled in december where they flooded the banks with money and they spent in the government bond market caused spreads to tighten but i think now this is buy the rumor and sell the fact. a moment where people say, we have a situation where european bond yields are so low that the upside potential is very limited and this is probably the time to exit. you will have the ecb as a buyer but you no longer have the swiss national bank standing there as a buyer as well. by cutting the cap, they effectively ended their need to keep spending these euros on buying more european government bonds. i think investors will look and say, i have already taken massive upside time to take the
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profit. if you take a look at the kitchen sink qe in japan last year, everyone thought fantastic, what will happen to jgb yields, but they tightened dramatically. our people then going to sell -- are people then going to sell the euro into this? maybe not, they will probably take the view that this will cause ruptures and what will the outcome the if the germans figure out a week euro isn't great for them and that's when we might see it take up again. -- tick up again. >> it has been a fascinating week. >> it always is. >> every time you come here. coming up, we will be speaking
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to the linkedin founder, reid hoffman. ♪
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>> welcome back to "on the move to go -- on the move." >> hans, over to you. >> it is a top name, i am joined by reid hoffman the cofounder
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and coexecutive chairman of linkedin. i will not go so far as to say you are the enemy but your clearly a competitor. you are creating content, tell us how the content providers see the world and how you see brussels? >> first thing, content providers, i think that the internet is just the beginning of how people stay informed. how networks can be curators and publishers and the fact that now at linkedin, we have a program where ceos and business leaders can build their own audiences. >> they are like old-time newspaper editors. >> we have some of that but also a network of duration. so when internet product managers within the u.k. are sharing a story, they will promote that story to other internet product managers. you're using network
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technologies to get highly relevant news for how you work. in terms of how we look at brussels there are two things. one is how you protect and care for consumers the right way. his privacy respected -- is privacy respected? are the right services delivered? those are legitimate things. sometimes the problem is the combat between companies and no should be done by the companies and not political forces. >> you are worried that big brother will put their thumb on the scale and claiming they are doing for net neutrality or whatever the buzz word but they are doing it to protect their space? >> that is a worry and you have to distinguish them carefully. we do need to protect consumers
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and we need to be right for everyone in europe and the world because the internet is global technology and fragmentation is bad from a consumer value and point of view but there is a potential for existing industries to say this is the way we want things suggest and shrine the past -- enshrine the past in regulation. >> so when you look at washington, when will they start sending as much as rustles lobbying, influencing and informing? >> most silicone valley companies arvada lobbying. -- our bad -- are bad at lob bying. we are slow and late to understand the right way to interface the government. >> i don't know if winning is the right thing and actually
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there are still nuances that a design on the future internet would be better in terms of how net neutrality works. part of the reason have net neutrality works is how do you have a platform where you build applications on it? part of it is you need to check that first before you do a deal. the level of innovation would go down precipitously. i think it would be good and i don't know if that is the case, since most -- since i don't do these kind of large-scale cable deals and fiber, i am not as close to brussels net neutrality, i am closer to, how do you do data management and privacy and cross-border services? i think it would be a good thing for europe and the world if they did. >> 2015, what can we expect in
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the connected tech world this year? >> i think you'll see the continued elaboration of markets and networks. people are just beginning to learn about a b&b where you can stay -- airbnb where you can stay in an apartment or room. i think you will see new kinds of marketplaces and one of the things we are seeing with ubiquity is you will have marketplaces fixing your car or walking your dog. i think you will begin to see those and i think you will see how financial services finally get transformed by the fact we all have a mobile phone and what identity means and transactions. >> that is very interesting hopefully those are the same when you have the same dog walking enterprise. maybe it will work and with that i will throw it back to you, i
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know you never stayed in an airbnb because you have grown used to five star hotels. >> i have been known to dabble. stay with bloomberg tv. ♪
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>> >> welcome back to "on the move." i am anna edwards. we are 30 minutes into tuesday's trading day. we have a green picture coming through on these equity markets. the growth story in china, markets choosing to look at the bright side. we had a little bit of disappointment come some of the biggest forces across europe. a little bit of m&a sprinted into the mix. let's go to caroline hyde, what are you watching? >> looking on the brighter things when it comes to the market and shareholders in the
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same thing after they released their earnings are you looking at the leaderboard, this tech company up by almost 4.6% because earnings the analyst estimates. and the bank that analyzes it says the 2015 guidance and cash returns are ahead of expectations. meanwhile phillips getting a nice little push of almost 4%. as for phillips, getting a little boost from private equity companies. this is being reported in the german press. they are not saying where they got their information run but maybe we could see an alternative to enter a initial share sell. shares are up 3.9%. not on the bright side of things is william hill.
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investors not liking the report up by 4.5%. sales were up higher and net revenue growing the first win margin up a percent but generally this is not being accepted well. william hill currently off by 4.5%. >> these are the bloomberg top stories. denmark's economy minister says they will not follow switzerland in on pegging the currency -- unpegging the currency to the euro. meanwhile, the turkish central bank is expected to cut rates later on today. this monetary fund has cut its outlook for monetary growth lowering expectations for almost every economy except the united states. they estimate the world economy
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will grow 3.5%, down from 3.8%, the figure presented in october. meanwhile, a different story in china. gdp they gears the analyst estimates and annual growth came in at 7.4%, the slowest pace of growth since 1990. stocks in china trading higher today. let's keep the conversation on the subject of china. we are joined now by miranda carr. thank you very much for coming into the studio to talk to us about the chinese story. what are you take away from these numbers? the weakest in 25 years or so. we knew that was coming in the government has been steering the economy to some extent. >> it is quite a strong signal
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the target was at five four 2014 and now at 7.4, it is still guiding lower. this means we could see 7% for 2015 and stocks could lower the target as we go through 2020. they are not trying to overreach the target or beat them anymore which is enter important change. >> an interesting nuance suggesting political dynamics, what does the number today tell us? will we see more or less of it? >> they are not going to shore up the economy and i think everyone understands that. they tried reform and then the economy slowed down and then talking stimulus and monetary easing, when you're going through these miniature cycles where you get one quarter of growth down and one quarter of
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slowdown. in the financial markets, rings go slightly crazy as we have seen and then it is regulated and brought back down again. you see similar financing and industrial cycles going like that. >> when we analyze the chinese growth rate, it seems we have to look at it slightly differently because of the nature the government emboldens the economy. do we have to question the government's ability to do that as they liberalize large parts of the economy? >> what it was all state owned banks and state owned enterprises, if the government said we will grow by this much then it would happen. but now a big move toward relying on the consumer and also introducing more variables into the financial picture.
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more capital market raised and private capital based so again you can't just direct the economy and say we will stimulate. your introducing much more liberalizing reform in and more risk. >> how week does the government allow the property sector to become? do they just want the property sector to stabilize, have a negative impact on the rest of the economy, how week could that story the? >> the sector is an interesting one because they had tried to want it up over the last year. they have removed the housing restriction and are trying to push mortgage lending but the consumers have not been paving. they are not investing or putting money into the stock market but taking the money overseas. it is not doing what is required so instead they are putting more
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monetary easing capital to help infrastructure spending. >> and where do the eu reforms -- where do they focus this year? their local government and its is, we talked about property markets, where is the focus on reform? >> the state owned enterprise reform is one thing and from last year they will continue this year. a lot of that can be given by economic incentive. last year it was slightly disappointing but this year the big esso we's --soe's. at the local government level they cannot just backed companies for financing. -- back companies for financing. the lower sphere of the economy is driven by the fact that there
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isn't cheap lending available anymore. >> talk about the rebalancing, you mentioned how the aim was to send the economy more toward consumption than investment. do you see evidence of that really coming to the foray? i know we have some retail sales numbers this morning that were above estimates, -- >> one of the biggest investments we will see is mobile phones. online shopping up 56%. you are seeing little it's of than many -- many economy seeing -- mini-economy seeing growth. overall, wage growth is slightly below gdp. only 6.8% rather than 7.4% for gdp.
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you are not seeing -- consumption will be struggling to rise higher than gdp because you are not seeing income growth as well. >> thank you for joining us today great to get your insight, aranda -- miranda carr. coming up we speak exclusively to the eu digital commissioner. what can tech firms do to become more competitive? ♪
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>> welcome back to "on the move ." i am anna edwards in london. the market shock from the swiss bank is felt in denmark. they're trying to assure they are not about to copy switzerland. the swiss bank says it has the necessary tools to defend the euro peg. a strong offensive being put up by the danes. >> you cannot find anyone in the research or analyst community or hedge fund community who thinks they are not serious about defending the peg. that makes me nervous. a one-way bet like that you if the market smells like, a can remain solvent longer than you can remain rational or
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irrational. i think the danger is coming out so quickly -- i think they are right to come out so quickly to get ahead of the curve but i would be terrified. >> not even any hedge fund is saying they would be prepared to test the result. you might think that is where the test will come from. >> a lot of people were bit by what happened with the central bank and there is a definite air of nervousness. if you got whacked by what happened with the swiss franc your appetite or trading is going to be limited and so the problem there is you have less liquidity and an even bigger shock if something does snap. >> the economy minister and others as spelled out many of the differences. it is a three decade old pay.
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-- peg. they talk about it being politically backed. those are all the differences but because of those, we cannot find anybody who says it will be kicked out. >> two days before, they said this is central to our economic policy and then it wasn't. there is a lack of trust about central banks. they can hurt you and in minutes. that nervousness is definitely out there in the market. it's like they dump protest too much. -- they doth protest too much. you can wonder why they are being so for severus about it. -- vociferous about it. >> a lot of focus on thursday on
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the ecb and whether he will deliver you a -- qe. >> i hope they have a surprise up their sleeves because if they disappoint, that will be a market a to remember. you want to see -- market day to remember. you want to see some shock and off from mario draghi. you do not want to see, we will do quantitative easing that it will be limited -- basically caving into the germans, that would almost be the worst of all worlds. >> thank you very much for joining us. mark gilbert joining us to talk about the war and exchange market. let's get to one of our big -- foreign exchange markets. let's get to one of our big stories, caroline hyde spoke to
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this ceo and asked him about emerging markets. >> we have about 60% up in the emerging markets of that is a good decision because despite what you read, the emerging markets are still growing. we think global growth is about 2.5%. we have forecast 2.9%. in this low growth environment the cost are little bit better and here you can see the 40 basis points. 11% earnings per share growth. you saw it this morning the imf lowering the world growth forecasts. europe is difficult to get growing and risks of deflation quantitative easing coming.
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we will have to see what that does euro growth started to pick up a little bit in the last quarter. then we have the many geopolitical forces, in the eastern european parts of this world and middle east and that obviously affects these markets. >> you say quantitative easing is coming and all the financial market are braced for thursday what would you like to see from mario draghi? will it be enough? >> we need to work together on this but as the example that the u.s. has shown, the risk of europe just pumping money in might not be enough if we don't address the fundamental underlying reasons. we need to make the european market more competitive again investing in education. if we don't make fundamental reforms we risk being
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uncompetitive which is the root of the issue. >> we saw in china, the stocking happening, a 25% decline of growth in the last quarter, is that starting to turn around? >> we are seeing positive signs there but he economy is slow. we thought it would be better instead of ineffective. especially in the big cities we thought it would be better to amend our own destiny. we are going through a six-month adjustment and then we will be able to make things work for us. >> here is caroline hyde with more. clearly, still very focused on the emerging markets. >> it remains to be europe. this was the worst growth we have seen which does marmite to
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magnums and cleaning products as well. the slowest growth in more than one decade for unilateral -- unilever. we saw more than a 3% decline in terms of sales, dragging it down 2% for the first year. an injection of cheap money. you need fundamental change to be able to boost up consumer sentiment, to be more positive. key advice going to mario draghi that emerging markets is still where it is at. we talked about how they are managing their brand in russia and how they can scale down cost without hurting the overall population but a are still resolute -- but they are still resolute that emerging markets
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will bounce back. at the moment they have almost 60% of their sales in the emerging markets. as you heard china not looking too good and thailand a bit of a problem. they want three quarters of all their sales to come from emerging markets. forget the headlines, this is where the growth is. europe would kill for the growth rates we are seeing from the. it is lower than it has been but it is where we will see the consumer going to eventually. that is why we have to continue our focus there. some interesting things i will bring you later on oil as well. oil doesn't make that much of a difference that you will see perhaps consumers have a more disposable income but not in the emerging markets. interesting that he says this is
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the opportunity to bring in climate change moves because oil prices are so low. we can start to cut some of our subsidies. interesting about why oil prices are enter opportunity, a little bit later. >> the world's largest oil field services firm is making a move -- somewhat surprising, into russia. stay with us. ♪
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>> >> welcome back to "on the move." let's look at the oil market, they're sitting just below the current oil market angst to a bit of m&a. >> is a bit of a shark and minnow market. you have shilumberger and the big driller in russia, the market cap before this deal was about 100 million dollars. if you look at it, they are getting this company on the cheap. the share prices come down something like 60% in the last month. shilumberger's prices have come
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down as well. 81% premium for yesterday's closing price for the investors in eurasia drilling. they will have to deal is the company so that schlumberger can get there 46% stake. that is pretty nice for a premium but on the other hand, that is still half of where the share price of this eurasia drilling company was a year ago. >> this highlights a couple of interesting phenomena. also, we have been talking about where we are going to see m&a taking place. >> when it comes to russia, this is interesting. as far as i can river, this is the biggest investment in russia post-sanctions. it is putting to the side the concern about the week oil price and also, sanctions.
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let's not forget drilling specifically identified as one of the areas targeted by the sanctions. this is really a case of schlumberger looking through that and taking advantage of that as it has been reflected in the share price to say, we think russia has good things going forward. as you said there is the greater backdrop of the sharks and the minnows out there and this is the shark using the consolidation of the oil services space to buy a minnow, a lot of that being driven by these oil companies, forcing these oil service dividers to give them -- providers to give them lower rate. >> we spoke earlier and this man was predicting we might see a rise in midsized oil services. rather than the megacaps. ryan, thank you for that. stay with bloomberg television
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"the pulse" is up next. you can follow me on twitter you will find me there much of the day and sometimes into the evening. ♪
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>> growth slashed. the i.m.f. downgrades its outlook by the most in three years. china's challenge. the weakest growth in 24 years. what next for the country's policy makers? denmark's euro commitment. the country's central bank insists it won't follow switzerland in severing its ties to the single currency.


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